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Home  >  Travel  >  Would You Support Airline Bailouts If Executives Chipped In Themselves?
Travel

Would You Support Airline Bailouts If Executives Chipped In Themselves?

Matthew Klint Posted onMarch 23, 2020March 23, 2020 13 Comments

Airline Bailout Executive Compensation

I’m curious, would you be more likely to support a bailout for the airline industry if executives returned the bulk of their compensation or chipped in from their own pockets?

Richard Branson, for example, is worth over $4BN, but has told Virgin Atlantic employees they need to take eight weeks of unpaid leave (which apparently means they cannot claim jobless benefits in the UK). Delta CEO Ed Bastian made a total of $14,982,448 in executive compensation last year. Incoming United CEO Scott Kirby made $5,459,414 while outgoing CEO Oscar Munoz made $10,493,832. Doug Parker earned $11,999,517.

Airline executives are paid a base salary plus performance-based bonuses based upon metrics, including stock price. The figures above are not cash payments and worth less today because airline stocks have dropped so precipitously. But the general pictures remains: executives were compensated very handsomely. Should they chip in if they want taxpayers to save their companies? It’s not like their money makes much of a dent, but it would be a symbolic step.

Look, I’m not trying to play the class warfare game here. I think that sort of compensation is obscene, but the disparity between the top and bottom is actually much smaller in the airline industry than many others. I’m not for placing caps on pay, even as I shake my head at the canard that such compensation levels are “required” to attract good talent.

But there’s this idea floating out there (even with assurances otherwise) that bailouts will reward bad behavior, even though COVID-19 is a black swan event. Would you, as a consumer and taxpayer, be more likely to support a bailout to sustain airlines and support airline workers with a giveback from C-suite? I ask this not just from a U.S. perspective, but to readers from outside the USA as well.

image: Virgin America (RIP)

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

13 Comments

  1. debit Reply
    March 23, 2020 at 4:16 pm

    Nope.

    Raise capital in free markets. The only reason they are not doing it is because they want a sweetheart deal.

    A executive chipping in is a do over. I would love a do over for all the stocks i didn’t buy, all the stocks i sold too soon and all the stocks i didn’t sell soon enough.

    I would be freaking rich. Where is my bailout? These people are pathetic.

    • Ravioliollie Kaye Reply
      March 25, 2020 at 4:42 pm

      A definite NO! I know, I know the smarmy will come out and tell us about all of the supporting groups who aren’t getting a pay check, but, labor is always in the crosshairs of THEM, and when the skies are full of flights, all of the supporting cast merely gets a pay check. There are a few bight spots as Delta showed last month, but NO as I’ve previously stated.

  2. rick b Reply
    March 23, 2020 at 4:25 pm

    Their personal money wouldn’t help much, but it’s a good start. Whatever bailout the airlines get they should be required to pay back as the first step.

    But, there need to be rules on HOW the top is compensated. Straight salary only, no stock options, no other behind the scenes perks that are tax free or taxed at much lower rates. The whole reason for all the stock buy-backs was so they could boost their own salaries since so much of it is in stock options.

    Also, artificially inflated stock prices cause effective salary expenses to go up, which lowers the corporate tax liability even more. And they’re doing while being subsidized by the IRS in the first place.

    Other rules need to be mandated minimum seat pitch, and mandated minimum service. I strongly disagree with charging for something like seat assignments or baggage beyond what’s reasonable for a regular traveler to carry. Airlines have gotten into the business of not so much giving you more service for more money, but making your life miserable and blackmailing you into paying more.

    Would be nice if there was some regulation of frequent flyer programs. No devaluations more than once very 2-3 years for example, must give 12 month notice.

    There probably more rules others can think of, but that’s the gist of it. If they get a bailout, they should be forced not to screw around with customers, no financial schemes like stock buy-backs. If they’re such a critical part of our world that they need special treatment, they need to be regulated more as well. That seems fair.

  3. Sexy_kitten7 Reply
    March 23, 2020 at 4:35 pm

    Well the disparity between the top and bottom (teehee) is actually quite large when you consider regional/contract/ground employees who make minimum wage like the rest of us!

  4. Bernie Reply
    March 23, 2020 at 4:45 pm

    It would only be symbolic, and they’d find another way to get what’s theirs, most likely by serving on boards and other “you-scratch-my-back-I’ll-scratch-yours” endeavors.

  5. Christian Reply
    March 23, 2020 at 6:01 pm

    Traveling For Miles came up with superb criteria for an airline bailout. The criteria mention executives returning compensation. Under his terms I think a bailout is a win/win/win.

  6. Andy K Reply
    March 23, 2020 at 6:29 pm

    Most of their compensation is in the form of restricted stock units, which are now plummeting in value. Perhaps they should forfeit their now-discounted RSUs, but could this remove their incentive to turn the Company around? I am all in favor of a fair deal for the government – have these guys repay bonuses, or give the government some form of equity. But anything these guys chip in would be a drop in the bucket to what is required and would ultimately be meaningless.

  7. jetlaggedaf Reply
    March 23, 2020 at 6:58 pm

    I fear we’re going to end up with yet another unaccountable use of taxpayer money propping up companies that made their own bed by buying back pretty much an identical amount of stock to what they’re asking for now as grants and interest free loans. I don’t dispute that the airlines need to survive this but I’d suggest using equity to do so instead of free money. All the government needs to do is to require airlines to issue the government equity in exchange for cash to tide them through this crisis. This would dilute existing shareholders, effectively negating all the buybacks of the past few years. The help would also come with the stipulation that the government wouldn’t sell the stock for 5 years and the airlines would retain the right to buy the government out of its stake at mark to market valuations at any time. I’d think the taxpayers would actually come out of such an arrangement with a pretty decent profit.

  8. Aaron Reply
    March 24, 2020 at 1:26 am

    Let then just get the money as loans and use their planes and whatnot as collateral.

  9. DavidB Reply
    March 24, 2020 at 8:29 am

    Sure. One year with all at VP and above to take the same wage as front line workers (includes maintenance and contract cleaning crews), no other senior manager gets more than 5x that average front line wage. And half of all their accumulated stock options distributed to those on the front lines. All federal dollars get converted into stock unless paid in full within two years of recovery. No dividends until feds are paid off one way or another. No grants or forgivable loans!

  10. Paolo Reply
    March 24, 2020 at 8:35 am

    At some point Americans are going to realise they’ve been sold the greatest lie in history: “I’m gonna drain the swamp” , only to see the claimant become the apex predator in it, , and evidently now determined to give these ludicrous bailouts to fellow swamp-dwellers.
    I wouldn’t give them a cent of public money. Nationalise and be done with these shysters, forever.

    • debit Reply
      March 24, 2020 at 9:21 am

      You give too much credit to Americans. They themselves are the swamp. They have fragile egos and are in competition with one another. What this means is they are willing to give tax cuts to billionaires if it means they get a small benefit over others in their own class or prevent others from getting that benefit.

      Americans don’t compete across classes. They compete within classes. And within that they don’t like the class definition to change too much from what they are used to.

      No one believed trump that he would drain the swamp. Americans are not that dumb.

  11. ed Reply
    March 24, 2020 at 2:35 pm

    ONLY for salary continuation (at some level) for the employees, except officers.
    There is no reason to make the airports, Shell Oil, the airframers, GE, P&W, et. al. whole. Let the airlines make their own private deals.

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